Post election update
As dawn broke following the General Election, the morning light revealed yet another political gamble that had not paid off for the dice roller. The UK has a hung Parliament, with no party holding an absolute majority. Such is the unpredictability of a parliamentary democracy. If you ask the people of the UK what they think, be prepared for the answers that you might receive!
The last few weeks has highlighted the divide in opinion in the country of the role and size of the state in our lives, with further austerity and a shrinking state on the one hand, and a material rise in spending (and taxation for some) on the other. Each of us has our own feel for what we believe to be best for ourselves and the country, which we were able to express at the ballot box on 8th June. We also remain, as a nation, somewhat divided on the Brexit issue, although perhaps mostly united in the reality that it is going to go ahead, in one form or another, respecting the will of the (slim) majority.
More importantly, the last few weeks has united us as a nation in grief and utter condemnation of the barbarous terrorist attacks in Manchester and London, and a deep sense of resolve that the values that we collectively hold as a nation are immutable: decency, respect, tolerance and democracy. The Election result illustrated what this truly means; Members of Parliament losing their seats, magnanimously shaking hands with their victors and accepting the right of the people to have their say. The election is another stark reminder to those who assault our values that they will never win.
Certainly, it is an awkward time for such political turmoil, with the start of the Brexit negotiations just days away. We will leave the ramifications of this result and the speculation of what we might expect next to others. We don’t want to add to the noise or a further sense of election analysis fatigue.
Strong and stable portfolios (if not government)
What we do want to do is to reassure you that your portfolio is well positioned to weather any storms both now and in the future. It is worth remembering the following:
- Your portfolio is highly diversified through the thousands of equities and bonds that it holds and the countries that it is invested in.
- Your non-UK equities are unhedged, which means that you hold this portion of your portfolio in non-GBP currencies. In the event of a fall in the value of Sterling (GBP), as we have initially seen, these overseas assets will be worth more in Sterling terms.
- Your bond holdings – which are hedged – are diversified across global markets, reducing the impact of any rise in the cost of borrowing that might occur on account of the greater uncertainty that the UK faces at this time.
- While markets don’t like uncertainty, the UK is a small player in the global pond and the General Election result is just a ripple.
- Portfolios go up and down; they always have and they always will. If you don’t need to spend the money today, don’t worry about what happens in the coming days, weeks and months.
Although the Election result may feel uncomfortable for some, let’s keep it in proportion. We live in a tolerant, open society – and by the look of the greater level of engagement in the election by the younger generation – a great democracy that cares passionately about its future. Put the kettle on, have a nice cup of tea and celebrate this next – if unpredicted and a little uncertain – step for our nation.
If you would like to speak with us about this or any other matter, please feel free to get in touch.
Other notes and risk warnings
- This article is for general information only, and is not intended to be advice to any specific person. No reader should take any action based on the content of the publication without first obtaining personal advice from us or their own financial advisers.
- The value of investments and any income taken from them can go down as well as up. Exchange rates may cause the value of underlying investments to fall as well as rise. You may not get back the value of your original investment.
- Past performance is not indicative of future results and no representation is made that any stated results will be replicated.
- Any reference to taxation is based on our understanding of the current position, which may change in the future.
- The actual taxation may be affected by individual circumstances.
- The FCA does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. The newsletter represents our understanding of law and HM Revenue & Customs practice. All rights reserved.